Ukraine War Risk Insurance: Who Carries the Risk When Trade Comes Under Fire?

How can Ukraine keep its international trade moving when ships, cargo, and production facilities remain exposed to Russian attacks? In the summer episode of Between Capitals, Alex Chen examines war risk insurance, U.S. legislative proposals, and the financial mechanisms that could help Ukrainian businesses continue operating during wartime.

The discussion explores a fundamental challenge for Ukraine’s economic resilience: investment can finance new equipment, expand production, and create jobs, but businesses also need protection against the risks that arise when goods must be transported through a war zone. Insurance can help address some of those risks, but its effectiveness depends on affordable premiums, reliable financial backing, clear coverage, and timely compensation.

Understanding the Cost of U.S. Policy

The episode opens with Chen recalling a conversation on Capitol Hill in April, when he led a Ukrainian advocacy delegation discussing sanctions targeting Russian energy revenues and the shadow fleet.

During the meeting, a representative of an American farmers’ association raised concerns about U.S. federal spending on Ukraine while some American farmers were still waiting for disaster assistance through FEMA.

Rather than dismissing the concern, Chen explained the purpose of the discussions, including the Prioritized Ukraine Requirements List (PURL), through which allies and partners finance military equipment sourced from the United States for Ukraine.

The conversation then moved to issues directly affecting American agricultural producers, including fertilizer and diesel prices, production costs, and the potential economic consequences of sanctions on Russian and Iranian energy.

For Chen, the exchange reinforced an important principle of advocacy: policymakers and stakeholders need to understand how a proposed policy affects the people who bear its costs before they can be expected to support it.

This approach also applies to war risk insurance. Any effective financial protection mechanism must account for the interests of shipowners, insurers, businesses, workers, international partners, and American taxpayers.

From the Black Sea to Ukrainian Business Operations

Chen recalls observing the Black Sea from Odesa between June and November 2022. During the early months of the full-scale invasion, there were periods when no ships were visible offshore. When shipping corridors began operating, six, seven, or sometimes eight vessels could be seen waiting to load or unload cargo.

The Black Sea Grain Initiative was signed on July 22, 2022, and its first vessel departed Odesa on August 1.

For Chen, those ships represented much more than maritime activity. Behind every shipment were agricultural producers, port workers, suppliers, customers, and businesses waiting for payment.

The summer episode builds on the central question of the spring discussion about investment in Ukraine. Financing a business and purchasing production equipment are only the beginning. The next challenge is ensuring that the investment continues generating economic value when production, logistics, and international deliveries are exposed to military threats.

What Happens When a Ukrainian Shipment Comes Under Attack?

To illustrate the problem, Chen considers a hypothetical Ukrainian company producing bottled sunflower oil for an international customer.

The business purchases sunflower seeds, processes the oil, fills bottles, and prepares finished products for export. Before the shipment even leaves Ukraine, the company has already committed substantial financial resources.

Employees expect wages. Suppliers expect payment. Equipment must remain operational, and the international customer expects delivery.

Several different risks can affect the same commercial order:

• Physical damage to production facilities: Russian attacks could destroy or damage machinery and other business assets.
• Energy disruptions: Electricity outages could interrupt manufacturing and delay customer orders.
• Cargo losses: Goods could be damaged or destroyed during maritime transportation.
• Maritime security risks: A shipowner might decide that the financial exposure of entering or leaving a Ukrainian port is too high.
• Business interruption: Even when physical damage is insured, production delays and lost income could create additional financial pressure.

These risks cannot necessarily be addressed through one insurance contract. The factory, its equipment, the cargo, and the vessel may require different policies covering different insured parties and types of loss.

Reinsurance can also help insurance companies distribute their exposure among other insurers. However, businesses still need to understand precisely which losses are covered, what exclusions apply, and how much financial responsibility remains with each party.

What H.R. 3973 Could Change

A central part of the episode examines H.R. 3973, the Ukraine War Risk Insurance Act, introduced in the U.S. House of Representatives on June 12, 2025.

The proposed legislation seeks to make qualifying vessels engaged in trade with Ukraine eligible for U.S. federal war risk insurance or reinsurance.

Among its proposed provisions are:

• Eligibility requirements involving vessel ownership by citizens of NATO member countries, Ukraine, and other countries approved through the legislative process.
• Adjustments to specified cargo restrictions.
• A coordinating role for the U.S. Department of State in working with insurance partners.
• A proposed five-year eligibility period beginning when the legislation becomes law.

The proposal builds on existing U.S. statutory authority under Chapter 539 of Title 46 of the United States Code, which provides a framework for federal war risk insurance involving vessels, cargoes, certain liabilities, and risks affecting people abroad.

However, this framework should not be confused with comprehensive insurance for every aspect of a Ukrainian business. A shipping insurance mechanism does not automatically protect a factory against equipment damage, electricity disruptions, or lost production income.

As of October 22, 2026, H.R. 3973 remained at the House committee stage. Introduced in June 2025, it had been referred to the House Foreign Affairs Committee and the Committee on Transportation and Infrastructure. It had not passed the House.

Both chambers of Congress would need to approve the same legislative text before it could be presented to the President. The proposed five-year eligibility period would begin only after enactment.

Chen also highlights a potentially important feature of the proposed legislation: its five-year eligibility window is not expressly tied to the beginning or end of a ceasefire.

In his interpretation, this could provide greater continuity for maritime operators during a ceasefire or a subsequent post-war period. A temporary announcement of reduced hostilities would not necessarily eliminate the risks associated with mines, renewed attacks, or disruptions to shipping routes.

Nevertheless, five years of eligibility would not mean five years of guaranteed insurance coverage. Premiums, policy terms, available coverage, and financial backing would remain decisive factors.

DFC and the Difference Between Maritime and Investment Risk

The episode also examines the role of the U.S. International Development Finance Corporation (DFC).

DFC political risk insurance can provide protection against certain losses associated with political violence, including eligible physical damage to assets and certain business income losses. Its published explanations also address certain income losses linked to damage to critical infrastructure that an investor does not own.

For the hypothetical sunflower oil producer, this distinction matters.

A shipment destroyed at sea and a production facility forced to shut down following damage to the electricity grid represent different financial events. They may require different insurance arrangements and different policyholders.

Financing a new machine, insuring the machine itself, and insuring the goods produced by that machine are separate financial decisions.

The practical challenge is to ensure that the available instruments work together rather than leave critical gaps in a company’s risk protection.

DFC support is subject to eligibility requirements and the specific terms of each policy. It should not be interpreted as automatic protection against every consequence of the war.

The Financial Challenge: Who Pays for the Risk?

Chen identifies the allocation of financial losses as one of the most important obstacles to expanding war risk insurance for Ukrainian trade.

Insurance providers must assess the probability and potential scale of claims, including the possibility that multiple vessels could be damaged in a single attack.

In January 2026, Reuters reported Black Sea war risk insurance premiums of approximately 1% of a vessel’s value for a typical seven-day period.

For a hypothetical vessel valued at $50 million, that would represent a premium of approximately $500,000 for seven days of coverage.

Such costs can significantly affect the commercial viability of a voyage.

A shipping company must consider whether the potential revenue from transporting cargo justifies the insurance premium and the remaining financial exposure. A Ukrainian exporter, meanwhile, must determine whether those additional costs can be absorbed without eliminating the profit margin on an international order.

This is why the debate surrounding H.R. 3973 extends beyond the legal authorization of insurance.

Congressional discussions and negotiations with international partners must address several practical questions:

• Can coverage be made affordable enough for commercial operators?
• How will financial losses be distributed between private insurers, international partners, and the U.S. government?
• What level of public financial backing will be available?
• Will insurance policies cover the specific risks that shipping operators actually face?
• Can claims be processed quickly enough to prevent a temporary disruption from becoming a business failure?

Chen also points to overlapping maritime insurance and coordination provisions in Sections 105 and 106 of the House-passed Ukrainian Support Act. That separate legislation remained awaiting Senate action at the time of the episode.

These proposals should be considered together when evaluating the broader U.S. policy framework for supporting Ukrainian maritime commerce.

Sanctions Against Russia’s Shadow Fleet

The episode returns to the shadow fleet discussion that opened Chen’s Capitol Hill story.

The proposed Shadow Fleet Sanction Act, S. 2904, sought to impose sanctions on vessels involved in sanctions evasion and supporting networks, including certain insurers and related maritime entities.

Similar provisions concerning maritime networks and insurance also appear in the Lindsey Graham-led Sanctioning Russian and Iran Act of 2026, as discussed in the episode.

The reason is straightforward: shadow fleets do not operate independently of financial infrastructure. They rely on insurance, financing, shipping services, and networks that help sustain their commercial activities.

U.S. authorities have sanctioned Russian maritime insurers and documented Iranian shadow banking networks connected to oil sales.

Chen emphasizes that possessing an insurance document does not necessarily mean that a vessel has reliable financial protection. The real question is whether the insurer can actually pay when a covered loss occurs.

This creates two interconnected policy objectives:

1. Helping legitimate Ukrainian commerce reach international customers through credible and financially sustainable insurance arrangements.
2. Making sanctions evasion more difficult by targeting the insurance and financial networks supporting Russia’s shadow fleet.

In both cases, insurance influences whether a maritime voyage is commercially viable and whether the associated risks can be justified by the expected return.

What Effective Insurance Means for Ukrainian Workers and Businesses

For Chen, the ultimate test of any war risk insurance framework is not simply whether a vessel qualifies for coverage.

The question is whether that protection changes a commercial operator’s decision to sail and allows Ukrainian businesses to continue fulfilling international orders.

A high premium could eliminate the profitability of an export contract. An exclusion could leave a shipowner exposed to precisely the event they fear most. Different circumstances, including drone or torpedo strikes, vessels trapped in attacked ports, and crew members injured or killed by shrapnel, may require different types of coverage.

Even an agreement between international partners can remain largely theoretical if it does not translate into practical protection for the companies expected to use it.

There is also the problem of compensation timing.

A major maritime incident involving a vessel and cargo worth millions of dollars can lead to complicated damage and liability claims. Even a valid insurance claim may take time to resolve.

Meanwhile, employees still need their wages, businesses must service loans, and suppliers expect payment. A company needs sufficient cash reserves or other financial resources to continue operating while the insurer processes the claim.

Chen therefore identifies three practical criteria for evaluating an insurance arrangement:

• Affordable coverage that makes commercial operations economically viable.
• Clear policy terms and exclusions that allow businesses to understand their actual protection.
• A workable claims process that delivers compensation within a reasonable timeframe.

If U.S. public funding carries part of the financial risk, taxpayers should also be able to evaluate the costs and measurable results of the program.

Insurance cannot prevent a missile strike, protect every crew member, or restore a life lost during an attack. Its purpose is to reduce certain financial consequences and help businesses recover from covered losses.

Keeping Ukraine’s Economy Moving Through War

The summer episode of Between Capitals connects the broader discussion of U.S.–Ukraine economic cooperation with the everyday realities of wartime commerce.

In the spring, the focus was on attracting investment, acquiring equipment, developing production, and creating opportunities for Ukrainian businesses.

The summer question is what happens next: how can those investments continue working when factories, infrastructure, ships, and cargo remain exposed to military threats?

For a Ukrainian manufacturer, reliable insurance could mean delivering an international order, receiving payment, retaining employees, and preparing the next shipment.

For workers and their families, that can translate into more stable employment and greater financial security. Local suppliers, service providers, and communities can also benefit from continued economic activity and tax revenues.

The broader objective is to ensure that the financial risks of operating in Ukraine do not make legitimate trade commercially impossible.

As Chen concludes, the purpose of war risk insurance is to give Ukrainian investment and production a better chance of surviving the war while supporting the country’s economy, freedom, sovereignty, and people.

Alex Chen is the host of Between Capitals, where he examines the intersection of economics, geopolitics, business strategy, and U.S.–Ukraine relations. His perspective combines business and finance education at Rice University’s Jones Graduate School of Business, U.S. Army combat experience and service in Germany alongside NATO troops, and several years of advocacy for Ukraine on Capitol Hill.